GM Buying Into Chinese Venture… But With What?

Dig through the dire news about GM floating around this morning’s autoblogosphere, and you just might notice a story that doesn’t quite jive with all the doom and gloom. Bloomberg reports that GM is “in talks with a local partners” to increase its 34 percent stake in GM-SAIC-Wuling, a Chinese light-truck and van maker. As our man in Beijing reports, China is aggressively stimulating its car market (which has bottomed out, by Chinese standards, at 11 percent growth) and GM wants in on the action. Of course there are just a few issues with the move– beyond the fact that GM has no cash with which to make such a deal. SAIC currently owns 50.1 percent of the consortium, and its Chairman Hu Maoyuan tells Bloomberg that it won’t be giving up its majority. “GM and our partner in Guangxi (Wuling) are still discussing how to settle the share transfer,” says Hu. So GM wants to spend cash it doesn’t have to increase a non-majority stake in an overseas joint venture. Non-starter, right? Not according to Ricon Xia, an analyst with Daiwa Associate Holdings…

Xia figures that GM’s “government first, market second” approach actually has a shot at succeeding in China. “Given the lobbying power of both SAIC and GM, the American carmaker will sooner or later get more shares. This venture is a vital part of GM’s China operation.” And why would China’s government lift a finger to help GM out, regardless of GM’s lobbying prowess? “The current financial situation may actually help GM push forward the deal,” according to Xia. “Especially given the Chinese government’s willingness to help the U.S. fend off the financial crisis that has also hit GM heavily.” As touching as it is to hear that the Chinese want do their part for our flagging economy, GM’s lack of cash seems like the real issue here. Besides, why would American politicians continue to push for a domestic bailout when GM is slashing all things American to up its investments in China? Go figure.